Page 258 - Bruce Ellig - The Complete Guide to Executive Compensation (2007)

244 The Complete Guide to Executive Compensation

When the company wishes a current employee to relocate to another area, it is customary
to reimburse the individual for a significant portion of the relocation expense. In addition to pay-
ing for the cost of moving the employee and family (possibly parents as well), many companies
will pay all or a portion of selling costs. This would include any loss the individual might incur
in selling below the appraised value of the house, travel and lodging accommodations while
searching for a new home (and waiting for it to be vacated), carrying charges (e.g., mortgage
payments and utilities) on the old house, and low-cost or no-cost loans until such house is
sold. If loans are involved, it must be remembered that loans may not be extended to insiders
under the 2002 Sarbanes-Oxley Act. In addition, a flat payment (e.g., one month’s pay) may be
included to cover miscellaneous related expenses. When the executive must accept a higher
mortgage interest on the new home, some companies will make up all or a portion of the
difference for a limited period of time. An approach followed by some companies is to buy the
house from the employee at the appraised price. Regardless of the approach, many companies
gross up payments to cover taxes. The tax treatment of moving expenses is described in Sections
82, 132, and 217 of the IRC.
While moving expense policies apply to all employees, they usually are of greatest value
to the executive due to the expense associated with moving and the extent of investment in
current housing and, therefore, are of high importance.

Athletic Programs
In the spirit of providing camaraderie after work, some companies sponsor various athletic
programs (e.g., basketball, golf, softball, and tennis). In addition to equipment, facilities
may be on or near company grounds. Placing athletic facilities on or near an executive’s
residence will probably draw attention from the Internal Revenue Service (IRS) as a
taxable benefit. However, when use is available in a nondiscriminatory manner, it will
probably not be taxable income (Section 132(j) of the IRC). It is also of low executive
importance.

Attendance and Service Awards
While hourly and weekly employees might be eligible for attendance bonuses (for specified
period of perfect attendance) or length of service bonuses (for each additional year of company
service), executive participation is normally limited to such programs as the service award.
For achieving milestones (normally in five-year multiples), the employee receives a pin or
other item reflecting the degree of service or might select a gift from a premium catalog. In
addition, 25 or more years of service usually means induction into a quarter-century club,
recognized by a special dinner. Section 274(j) of the IRC reviews achievement awards, which
are of low executive importance.

Clothing
Laboratory and production facilities often provide clothing or clothing allowances. Office
settings rarely do, although some wish it were so. For the office, acceptable attire ranges
rather significantly from the casual Friday (to full casual week) to suits and ties for men and
comparable attire for women. Executives usually set the high end of the dress code and may
even, in some situations, receive a clothing allowance; nonetheless, this benefit ranks low in
executive importance.